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Write an equation for value of the marginal product

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Reference no: EM132131799

Question - A firm has two variable factors and a production function, f(x1, x2) = x1½ x2¼. The price of its output is 4. Factor 1 receives a wage of w1 and factor 2 receives a wage of w2.

(a) Write an equation that says that the value of the marginal product of factor 1 is equal to the wage of factor 1 2x1-½ x2¼ = w1 and an equation that says that the value of the marginal product of factor 2 is equal to the wage of factor 2. x1½ x2-¾  = w2. Solve two equations in the two unknowns, x1 and x2, to give the amounts of factors 1 and 2 that maximize the firm's profits as a function of w1 and w2. This gives x1 = 8/(w13w2) and x2 = 4/(w12w22).

Reference no: EM132131799

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